Which is the better incentive, a carrot or a stick? Economists working with managers of a Chinese electronics factory recently discovered that by changing the wording of a productivity bonus scheme it became more effective.
The Economist reports that at the beginning of the week, some workers were told they would receive a bonus at the end of the week if they met a given production target. Other groups were told that they had "provisionally" been awarded the same bonus but they would "lose" it if their productivity fell below the same threshold.
Objectively these are two ways of describing the same scheme. But under the theory of loss aversion - that is people attach greater value to things they already have and abhor losses more than the equivalent gain - workers thought of the provisional bonus as theirs and worked harder to prevent it from being taken away.
Carrots, this research suggests, may work better if they can somehow be made to look like sticks.
